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BBVA Expect Banxico To Stay On Hold One More Meeting

MEXICO
  • BBVA expect Banxico to stay on hold at 11.25% tomorrow, amid sticky core services inflation, but they believe that it will continue to pave the way for a cut as soon as the following meeting in March. Although Banxico does not usually clearly signal any future decision in the statement, it might give another clue to signal that it is planning to adjust the overnight rate in the short-term.
  • Banxico may raise its headline inflation forecasts due to the jump in the non-core index, but BBVA think it will also adjust its short-term core inflation forecasts downwards. They expect Banxico to focus on the improvement of core inflation as it cautiously proceeds with its plan to prevent the real ex-ante rate from increasing during 1H24.
  • BBVA think that Banxico’s cautiousness, hawkishness, and recent hints suggest that consecutive rate cuts are unlikely at the start of the gradual easing cycle. As a result, they continue to expect Banxico to bring down the policy rate to 9.0% by year-end, but they believe that risks are tilted to a somewhat higher rate.
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